Wednesday 5 November 2008 06.30 EST
First published on Wednesday 5 November 2008 06.30 EST

The financial crisis and now deepening economic recession in Europe have buried one of the critical issues facing the EU: migration and its potential role in tackling skills shortages. It hasn't gone away; it remains acute. Indeed, as global competition for high skills deepens, it's there in heightened form.

Three weeks ago, when the EU summit embraced calls for a new global financial architecture, the 27 leaders also endorsed French presidency plans for a "pact on immigration", including an extended Blue Card scheme to attract skilled scientists, engineers and others in short supply.

This week, in, of all places, Vichy, former HQ of the collaborationist Pétain regime under the Nazi occupation, the 27 interior ministers debated measures to integrate a rapidly growing population of foreign residents – including up to 8 million "illegals" whose numbers are growing at around 500,000 a year. Under another forgotten piece of EU legislation, the "return" directive recently adopted, thousands of these face deportation and/or jail.

The recession has finally sunk the EU's "Lisbon" agenda of creating the world's most competitive, knowledge-based economy by 2010. Rising unemployment means Europe will fail by a wide margin to reach one of its Lisbon targets: a 70% employment rate (it'll be 65% by 2010, the EC says). But it has also blown a huge hole in all working assumptions about migration patterns in the next few years.

At a seminar here this week organised by the IPPR/Centre for European Reform, experts agreed that net inflows and outflows were now unpredictable. But we all agreed, too, with Peter Sutherland, BP chairman and UN secretary-general special representative on migration, who said recently: "It is inevitable that if GDP growth globally declines ... then this will have an effect on migrants, either in terms of wanting to go home or in terms of being unemployed in the places to which they come."

Both of these impacts are already being experienced in the EU, not least in Britain, Ireland and Spain, three of the countries worst affected by the bursting of the housing/credit bubbles and facing the deepest recessions. Spanish unemployment climbed last month to more than 11% and is on course for 15%, with the number of foreign migrants on the dole rising 46% in the past year to close to 350,000.

This has huge implications for, say, UK government welfare spending, borrowing and growth. Ministers who opened the door to migrants from the "A8" group of new member states from ex-communist eastern Europe when they joined in 2004 have asserted that these have helped raise GDP growth and made few, if any, demands on the welfare state.

So, what's going to happen now when the UK recession will be the longest and deepest in the EU-27 – and Poland, say, sees its growth rate drop closer to 5%? Naomi Pollard, an IPPR researcher and co-author of this year's report, Floodgates or Turnstiles?, documenting the return home of around half the 1 million Poles who came to Britain in the past four years, is not alone in her uncertainty. Apparently, if the zloty rises against the pound, the trek back to Krakow or Katowice speeds up; if it declines, it slows down. She thinks one-in-five Polish immigrants will settle permanently.

Bela Galgoczi, senior researcher at the European Trade Union Institute and co-author of an upcoming study, suggested that thousands of the 2 million Poles who have left home, of which 1.5 million for other EU countries, may return now that wages there are rising. Incomes rose just 10% in Poland in the past four years compared with 80% in the Baltics. Poland has also created 1.6m new jobs since accession in 2004.

Just under 3% of Poland's population left home, half of these under 25. Of those going to Britain 27% had university degrees compared with an EU-15 average of just 12%. But he thinks that, of the net outflow of 1.12 million, only 50,000 emigrants will settle permanently abroad. Quite a few of these could stay in Norway which, even with a relatively restrictive policy, admitted 89,430 east Europeans compared with just 16,900 in Sweden, which has an open doors policy.

So countries like the UK could lose out as the early wave of young, skilled, urban migrants heads home. (The IPPR's Pollard detects swelling numbers of Hungarians coming to London as their home country is bailed out of its economic meltdown.) And Jakob von Weizsaecker, a research fellow at the Bruegel thinktank, thinks there may be a greater influx of potential migrants from the non-EU parts of Europe such as Ukraine. It, too, is in the throes of a political and economic crisis.

Either way, and the picture is highly confusing, the "war of talents" among countries wishing to attract young people with critical skills will intensify. Goran Hultin, a labour market advisor to Manpower, told the seminar that, while the US may turn to Europe, the Chinese, Indians and other emerging economies may begin bringing their skilled emigrants home as shortages come to light and they make technological advances. If Europe doesn't start investing in improving its universities and skills training, it could lose out. Big time.

Fortis, worth €40bn a year ago, has now shrunk to an international insurer and part-owner of its toxic assets. Its banking and insurance operations have been nationalised by the Belgian and Dutch governments, with the bulk of its Belgian business due to be taken over by France's BNP Paribas.

Belgian state prosecutors are investigating its current and past senior executives for potentially misleading the market in the run-up to its demise. Dutch and Belgian shareholders who have lost their life savings have taken it to court. Early next month, the latest in a series of hapless executives will try to justify themselves to angry investors at extraordinary meetings here and in Utrecht.

Anderlecht chairman Roger Vanden Stock says bluntly of the decision to scrap talks on renewing the sponsorship deal after it runs out in June 2009: "Fortis has become a synonym for losers."